The IPA and Wisconsin’s 1969 Patent Policy, 2

This article starts here:

The IPA and Wisconsin’s 1969 Patent Policy, 1

In the new 1969 Wisconsin patent policy, we encounter a corporate agent and the passive voice: “it has become necessary for the University to scrutinize with care the funding which has assisted the making of the invention to be sue that all the obligations attaching to the contract or grant have been met.” The University, of course, cannot scrutinize anything. Someone has to act for the University to do the scrutinizing. Who should that be? Administrators? Faculty investigators? Patent brokers looking for more work? The policy doesn’t out and say “administrators” but that’s the clear implication, as will be made apparent in the policy soon enough.

The Wisconsin policy now turns to a discussion of the IPA program, announcing that the university now has an IPA master agreement with the Department of Health, Education and Welfare (HEW). Signing on to the IPA program, then, forms the reason for Wisconsin to have a patent policy. Why? Well, for one thing, the IPA program requires a review of a university’s patent policies and practices before a university can be signed up. So Wisconsin rather has to have something to show, if it wants to participate in the IPA program.

This IPA appears to have been the first master agreement negotiated after Norman Latker revived the IPA program at the NIH. We will get to what the policy means when it describes the IPA program as giving inventors “greater latitude.”

Inventions are to be “processed” rather than “claimed by the University and assigned to WARF for commercialization.” In this context, “processed” is more abstract than what happens to, say, sausage meat. Bremer at WARF and Latker at the NIH negotiated an IPA deal that allows Wisconsin to require assignment of inventions from its inventors, and then assign the right to receive assignment to WARF, where Bremer worked. Thus, the policy describes a pipeline of inventions made with federal funds going to WARF for management, via the university IPA. This is the first “modern” private pipeline of federally funded inventions to a patent broker. (There were other IPA agreements with nonprofits and universities in the 1950s, but the program had been suspended and no new institutions had been added for some time).

The Wisconsin IPA and patent policy statement are, essentially, ground zero for what will be claimed as a key feature of Bayh-Dole. The NIH IPA program would expand to some fifty organizations, add the NSF, attempt to expand government wide, get blocked, then get shut down by HEW, only to then arise again more powerful than one could possibly imagine as Bayh-Dole.

According to Wisconsin policy, under the IPA, an inventor has a choice–assign to the government or assign to WARF.

The policy here presents a faulty set of options–both because an inventor may not have to assign to the federal government and because the inventor ought not to have to choose only WARF, but for university administrators compelling that choice. The IPA does not require this set of choices–these choices are allowed “under the terms” of the IPA but are not required by the IPA. It is university administrators that have decided to designate WARF as the only invention management organization that inventors may work with. Inventors might have chosen instead Research Corporation–but the new Wisconsin patent policy precludes such options.

The IPA requires the university to require assignment for only those inventions that the university has chosen to file patent applications on:

The Wisconsin policy navigates this requirement by indicating that the inventor “may submit” inventions to WARF for consideration. What’s left out is the idea that an inventor might let WARF look at an invention, WARF might decide it wants it, but the inventor might decide that WARF’s terms or its marketing ideas are all wrong and instead refuses to assign to WARF. That is, the policy makes it appear that inventors have no room to negotiate with WARF how they want WARF to deal with their inventions. It’s a WARF-take-all policy.

In the IPA, the assignment that is expected is one directed to the actual patent application, in which the invention will be exactly specified. This is an important point. The IPA requires the university to make the commitment to file a patent application, prepare that application, and then obtain the inventor’s assignment of rights “under” that patent application. The sequence is not “obtain assignment of invention” and then “futz around with whether to file a patent application.” The IPA requirement is narrow and directed to a specific sequence. This sequence will be tossed when it shows up in Bayh-Dole. The Wisconsin restatement of the IPA makes it appear that inventors must assign before they know whether WARF will file a patent application. This will be the practice that gets instantiated in Bayh-Dole. It is details like this in which we can see the slippage from institutional compliance with regard to inventions in research agreements to institutional conflict of interest in seeking ownership before making any commitments.

There’s more, of course. If the university’s general policy is not to require assignment of inventions as a condition of employment or use of resources or involvement in research, then the university really cannot make the choice to file any patent application until an inventor has agreed to permit the university to do so. All the university can do under its policy is indicate to an inventor that it will file a patent application if the inventor assigns the invention to the university (or in this case to WARF). Thus, the inventor’s first option is to deal with the federal government, as if there were no IPA. There is nothing in the IPA that requires the inventor to assign any invention to the federal government. The obligation to assign to the government shows up in (if it does) in the federal funding agreement (and that, in turn, may be a set of regulations that stipulate what the federal contract is). Under the terms of the Kennedy executive branch patent policy, the decision about inventor assignment was a matter of the funding agreement, and within that, the decision about whether to allow an inventor to publish, or to take assignment and “dedicate” the invention or to file a patent application and license non-exclusively (and likely royalty free) is again a matter of agency discretion, depending on its regulations.

The Wisconsin policy makes it appear that the IPA requires inventors to assign to the government if they do not assign to WARF. But that’s just not the case. But one might expect such misrepresentations if the university has a conflict of interest and wants to create a pipeline of inventions to WARF to be licensed for the university’s profit. Or, given that it appears that Bremer was behind the drafting of the university’s patent policy, it might be expected that WARF had an interest in routing all inventions made with federal support to WARF for management, and not allowing the government to take control, and certainly not allowing inventors to take their inventions (with government approval) to other invention management agents, such as Research Corporation.

According to the policy, if inventions go to WARF, then WARF will be a worker bee to “exercise its best judgment to bring the invention quickly and effectively into public use” and the inventor will get 15% of net royalties. Otherwise, the invention goes to the federal government, which apparently does nothing at all with it.

The Wisconsin patent policy, of course, omits that HEW is required by executive branch patent policy to act in the public interest with all such inventions, and that HEW standing policy is to release inventions by dedicating them to the public or licensing them non-exclusively:

Government-owned patents shall be made available and the technological advances covered thereby brought into being in the shortest possible time through dedication or licensing and shall be listed in official government publications or otherwise.

The language regarding WARF is remarkably similar to the Kennedy executive branch policy. One might think that an inventor could willing choose government invention management–especially if the goal was broad public access and not a patent monopoly with an income teaser. It is also not made obvious by Wisconsin’s policy that the IPA itself requires a default of non-exclusive licensing, perhaps royalty-free, and that exclusive licenses are only to be sought when non-exclusive licensing has failed or is not “feasible” and even then only for limited periods of time.

The effect of the IPA is to make it appear (to the federal government and the public, in the event that the public were at all interested) that WARF is carrying out HEW’s obligations under executive branch patent policy, but doing things potentially better because WARF is closer to inventors, has greater capability to manage patents, and is more motivated (profit incentive, but profits to go to university research) to find licensees. But the IPA also contains a pathway (for patent brokers, university administrators, and willing inventors) by which patent monopolies can be secured and licensed exclusively to companies. While the IPA does not highlight this pathway, patent brokers did and continue to do so, although the pathway now is established by Bayh-Dole, not the IPA program.

The IPA is drafted to create a substantial apparatus to hide this pathway, or to rationalize it, to make it appear “in the public interest.” Thus, we find extra language about non-exclusively licensing and how that licensing approach might fail or not appear “feasible” and thus there might, infrequently, be the need for exclusive licensing, but with various protections such as justifications, limited terms, reasonable terms, and government intervention if things aren’t working out to the government’s satisfaction. But even all this apparatus is just bloat if the government doesn’t follow through and enforce these requirements on exclusive licensing. And, apparently, the NIH never did get around to doing much enforcing at all.

Despite the IPA apparatus, the WARF agenda for the IPA was decidedly not to do with inventions what HEW was required to do, but rather to do the HEW one better. When the IPA program was reviewed a decade later, folks found that the universities had done almost all their licensing exclusively. There never would be a robust IPA program of non-exclusive licensing based on access to federally funded inventions, even though high-profile licensing programs involving inventions not made with federal funds had featured non-exclusive licensing, including WARF’s own programs for irradiated milk (to end-run restrictions on milk additives–just zap the milk to create vitamin-D) and warfarin (rat poison becomes medical therapeutic).

We now get to the Wisconsin rationale for disclosing all inventions:

The “university”–administrators–review all invention reports for compliance with funding agreement obligations. It is easy to see how this requirement might now morph into a review for university interest in these inventions rather than contractual compliance with the requirements of research sponsors. By agreeing to the IPA program, university administrators have introduced institutional conflict of interest into their patent policy. Previously, the university had no interest in inventions. Compliance with research funding agreements was just a matter of compliance. The university had nothing in the game but compliance. But now with federal funding, the agreement negotiated by university administrators with the federal government requires the university to make inventors assign their inventions to the university or to the university’s designated patent broker, WARF–whenever WARF decides that a subject invention is worth patenting.

Under the IPA, WARF decides what is worth patenting; WARF decides to patent; WARF can compel Wisconsin inventors to assign their inventions. The IPA does not require WARF to decide what to patent, or when. But the IPA creates the obligation for inventors to assign whenever WARF, as Wisconsin’s “designee,” wants a patent. In essence, Wisconsin administrators change the patent practice without appearing to change patent policy. They make it appear that the federal agreement–the IPA–requires the change. But it doesn’t. Under the IPA, Wisconsin could still have left the decision whether to patent to inventors, in which case, if the inventors wanted “certainty of title,” they would select an invention management agent, Wisconsin administrators would designate that agent, and the inventors would assign title to that agent, in exchange for whatever services and financial considerations offered by that agent, along with the obligations specified in the IPA. If inventors did not want to assign to an agent, but still wanted to deal in with a patent, then they would have to work it out with the federal government.

In effect, the IPA encourages inventors to use an invention management agent–either the university or one or more agents designated by the university. This, even, might sound good. But there’s one more thing: the IPA makes it more difficult for an inventor to deal directly with companies. If an inventor wants to license to one or more companies and not work through an agent that owns the patent, then it’s up to the federal government whether to require assignment of the invention to the government or let the inventor manage the invention. Why? What’s the rationale for pushing the assignment of inventions to management agents? Why could not an inventor simply hire an agent to do the work all without giving up ownership of the invention to the agent? There’s a whole discussion there–but the key point is that there’s no good reason why the federal government should create a contracting mechanism under which inventors must assign their inventions to private management agents, whether universities or their affiliated foundations, whenever the private agent decides.

There does not appear to be anything in Wisconsin university research or patent policy that gave the university the right to negotiate an IPA with the government–outside of any specific research proposal–that stipulates that the university must require inventors to assign inventions to the university. And in doing the deal, university administrators set up WARF as the favored external agent to do any patent work–all but ensuring that Research Corporation, say, would not get any work from Wisconsin inventors supported by federal funds.

Here, then, is how the slip to institutional conflict of interest works. In normal circumstances, the university’s review of whether any given invention is within a sponsor’s claims to a license or assignment would be objective–is there documentary evidence that the invention was made with sponsor support? Is the invention among the specified deliverables of the grant? Did grant funds go to make or develop the invention?

The university has an interest in expanding the scope of the IPA claim on inventions made with federal support. Anything that appears within scope, the university gets if anyone in the university wants it (or anyone designated by the university wants it). If there were no IPA, then the university’s “scrupulous” attention to compliance would be indifferent to the invention ownership outcome, but for the satisfaction of each research sponsor that it obtained the deliverables that it had bargained for. But with the IPA, the university now reviewed inventions for its own deliverables–or deliverables via WARF’s efforts to transform patents into money. This, then, is the second ground zero represented by the Wisconsin policy–using federal funding as the premise to review inventions for the host institution’s own ownership and financial interest. Wisconsin is not the first university to claim some interest in faculty inventions–it was actually among the last to do so. But it was the first–as far as I can tell–to connect its ownership claim to federally sponsored research. And it used the first IPA in the revived NIH program to do that.

The review for ownership, according to Wisconsin policy, involves both the dean (“relation of the reported discovery or invention to the purpose of any grant or contract that may be involved”) and the business office (“review of the financing of the scientific investigation leading to the discovery or invention”). Once these groups have completed their review, then the “Central Administration” will “determine if an obligation to a grantor does exist.” This apparatus is all very strange for research contracts in general. A contract, well drafted, will make clear the scope of any deliverables, especially important ones in the form of patentable inventions. Such contracts do not require reviews by deans and business officers and senior university officials. Indeed, it is difficult to imagine deans and business officers and university vice presidents having much capability at all to review the technical details of an invention, its circumstances of development, the statement of work (one or more), and the contractual requirements of a funding agreement (one or more). This would appear to be work for a contracts attorney with a working knowledge of the technology involved in making the invention.

Next installment:

The IPA and Wisconsin’s 1969 Patent Policy, 3


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